Answer:
Units of bonds to be sold = 51, 122.75 units
Explanation:
The price of a bond is the present value (PV) of the future cash inflows expected from the bond discounted using the yield to maturity.
The price of the bond can be calculated as follows:
Step 1
PV of interest payment
Interest payment =( 5.98%× $2000)/2
= $59.8
Semi annual yield = 6.76/2 =3.38 %
PV of interest payment
= 59.8× (1-(1.0338)^(-15×2))/0.0338)
=$ 1116.5682
Step 2
PV of redemption value
= 2,000 × (1+0.0338)^(-15×2)
= 737.7923719
Step 3
Price of bond
=$ 1116.568 + 737.7923
=1854.360
Step 4
unit of bonds to be sold
= Amount to be raised /price of bond
=$94.8 million/1854.360
= 51, 122.75 units
Suppose real GDP in Puerto Rico is $48 billion and its annual growth rate is 8%. Real GDP for Puerto Rico will double in 6 years. 7.5 years. 8 years. 8.75 years. an indeterminate amount of years with the information given.
Answer: 8.75 years
Explanation:
To solve this we can use the brilliant rule of 70 which posits in it's simplest form that an amount will double if we decide 70 by it's required rate.
For example if you want to know how long your 20 billion will take to double given a 15% rate you say,
= 70/15
= 4.67 years.
In that same light therefore, we can calculate for this question thus,
= 70/8
= 8.75 years.
If you need any clarification do comment.
Flyaway Travel Company reported net income for 2021 in the amount of $101,000. During 2021, Flyaway declared and paid $3,225 in cash dividends on its nonconvertible preferred stock. Flyaway also paid $21,000 cash dividends on its common stock. Flyaway had 51,000 common shares outstanding from January 1 until 21,000 new shares were sold for cash on April 1, 2021. What is 2021 basic earnings per share
Answer:
The basic EPS for Flyaway in 2021 is $1.4648 per share
Explanation:
The basic earnings per share or basic EPS is the amount of earnings that are allocable to the common stockholders expressed in terms of per share earnings. The basic EPS is calculated by dividing the Net Income after adjusting for preferred stock dividends by the amount of weighted average number of common share outstanding during the Year. Thus, the formula for Basic EPS is,
Basic EPS = (Net Income - Preferred stock dividends) / Weighted average number of common shares outstanding
Weighted average number of common share outstanding during the year for Flyaway is = 51000 + 21000 * 9/12 = 66750 shares
Basic EPS = (101000 - 3225) / 66750
Basic EPS = $1.4647 per share
During January, LexPro Co., which maintains a perpetual inventory system, recorded the following information pertaining to its inventory:
Unit Total Units
Units Cost Cost On hand
Balance on 1/1 1,000 $1 $1,000 1,000
Purchased on 1/7 600 3 1,800 1,600
Sold on 1/20 900 700
Purchased on 1/25 400 5 2,000 1,100
Under the moving-average method, what amount should LexPro report as inventory at January 31?
Answer:
$3,225
Explanation:
The computation of the amount reported as an ending inventory is shown below:
Date Particulars Units Cost Amount
1 -1 Op Balance 1,000 $1 $1,000
1 -7 Purchases 600 $3 $1,800
Total 1,600 $1.75 $2,800
($2,800 ÷ 1,600 units)
1 -20 COGS 900 $1.75 $1,575
Total 700 $1.75 $1,225
1 -25 Purchases 400 $5 $2,000
Ending inventory 1,100 $2.9318 $3,225
($3,225 ÷ 1,100 units)
We simply added the purchase units with the opening balance and deduct the cost of goods sold units from the opening balance so that the correct ending inventory amount could arrive
As the only store to design and sell curtains in the suburb of Oakland, the merchandise sold by Plush Parade is overpriced. Noticing this, Diana's Draperies sets up a showroom in the same suburb, reasoning that with lower prices, they would be able to attract more customers. Diana's Draperies is Plush Parade's _____.
A. partner
B. distributor
C. competitor
D. processor
E. franchiser
Answer: (C) Competitor
Explanation:
According to the given question, Diana's Draperies is basically plush parade's competitors as Diana's Draperies noticing the business of Plush Parade that they designing and then selling the curtains to the customers.
So, they started the same business of Curtains designing and by using the business strategy they start selling the same product at lower price for the purpose of attracting the customers or users in the market.
The competitors is the rival of each other in the business and they usually offering the same products in the market for attracting the consumers in low price for establishing their business.
Therefore, Option (C) is correct answer.
You are 40 years old. Your investment portfolio currently consists of: (1) a savings account, with a $16,000 balance, (2) certificates of deposit (CDs) worth $20,000, and (3) an investment portfolio consisting of 40% bonds, 40% equities, and 20% cash and cash equivalents. Your bonds are thirty-year U.S. government bonds, while your equities are made up solely of your employer’s stock. Your cash holdings consist of your savings account and CDs. Your employer’s stock paid a 1% dividend and its market value has increased 10% over the last year. The bonds have paid 3.0% interest. The rate of inflation is 2.5%. Your investment goals are mainly focused on retirement, and you have no large purchases planned in the short term.
The value of your current investment portfolio is (180,000 or 144,000 or 108,000 . This consists of 36,000 or 100,000 or 80,000 in cash and cash equivalents, 108,000 or 72,000 or 54,000 in bonds, and 90,000 or 72,000 or 54,000 in equities.
Given the existing composition of your investment portfolio, how would you characteristic your investment strategy? Is it conservative, moderate, or aggressive?
a. The investment strategy is aggressive.
b. The investment strategy is moderate.
c. The investment strategy is conservative.
The value of the current investment portfolio is $108,000 and b. the investment strategy is moderate.
Explanation:The value of the current investment portfolio can be calculated as follows:
Cash and cash equivalents: $16,000 + $20,000 = $36,000Bonds: 40% of $90,000 = $36,000Equities: 40% of $90,000 = $36,000The total value of the investment portfolio is $36,000 + $36,000 + $36,000 = $108,000. Given the composition of the investment portfolio, with a mix of bonds, equities, and cash, and the focus on retirement goals, the investment strategy can be characterized as moderate.
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Organic Specialties sells organic mixes for soups. The company produces 5,000 packages per day. The total variable cost for making one bag of Organic split pea soup is $3. The average fixed cost per bag is $.90. The company charges $6.50 per bag and earns a 40 percent profit. Calculate the break-even point in units.
Answer:
Break even point in units is 12858 units.
Explanation:
The break even point in units is the number of units that are needed to be sold by the company to earn enough total revenue to cover its total costs. It is a point of no profit and no loss. The break even point is calculated as follows,
Break even point in units = Total fixed costs / Contribution per unit
Where,
Contribution per unit = Selling price per unit - Variable cost per unit
Total fixed costs per day = 0.9 * 5000 = $45000
Contribution per unit = 6.5 - 3 = $3.5
Break even in units = 45000 / 3.5 = 12857.14 units rounded off to 12858 units
Suppose that the exchange rate between the dollar and the euro was euro0.879 per dollar in December 2018 and euro0.900 per dollar in December 2019. From December 2018 to December 2019, the euro:
A. appreciated against the dollar because more euros are needed to purchase one dollar.
B. appreciated against the dollar because fewer euros are needed to purchase one dollar.
C. depreciated against the dollar because more euros are needed to purchase one dollar.
D. depreciated against the dollar because fewer euros are needed to purchase one dollar.
Answer:
C
Explanation:
Suppose that the exchange rate between the dollar and the euro was euro0.879 per dollar in December 2018 and euro0.900 per dollar in December 2019. From December 2018 to December 2019, the euro: depreciated against the dollar because more euros are needed to purchase one dollar.
If you needed 0.879 euro in December 2018 in December 2019 you need 0.900 euro which means you need more euro to buy the dollar
what is code of conduct in hospitality?
Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally produces 82,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows:
Direct materials $3.10
Direct labor 2.25
Variable overhead 1.15
Fixed overhead 1.80
Total $8.30
Suppose a customer wants to have its company logo affixed to each paperweight using a label. Smooth Move would have to purchase a special logo labeling machine that will cost $12,000. The machine will be able to label the 15,000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be incurred. In addition, each special logo requires additional direct materials of $0.20.
Required:
a. Should Smooth Move accept the special order?
b. By how much will profit increase or decrease if the order is accepted? If your answer is decrease, enter negative value.
Answer:
a. Smooth Move should REJECT the order
b) Net loss from accepting the order $ (7,500)
Explanation:
Relevant costs are future incremental cash costs that arise as a direct consequence of a decision.
The relevant cash flows of this decision include the following:
Variable cost of production -(3.10 +2.25 +1.15) + $0.20= $6.7 per unitCost of additional machine - $12,000. Sales revenue from the special offer$
Sales revenue from special offer (15,000×$7.00) = 105,000
Variable cost (15,000× $6.7) (100,500)
Cost of additional machine - (12,000)
Net loss from accepting the order (7,500)
Smooth Move should not accept the special order as the incremental costs exceed the incremental revenue. If the order was accepted, it would result in a profit decrease of $4,500.
Explanation:The subject of this question falls under Business, specifically managerial accounting. For a, whether Smooth Move should accept the special order depends on the incremental revenue and incremental costs of the order. Incremental revenue is straightforward: 15,000 units * $7/unit = $105,000. Incremental costs, however, are a bit more complex. They include variable production costs, additional material costs associated with the logo, and the cost of the special logo labeling machine. Variable production costs are $6.50/unit (direct materials + direct labor + variable overhead + additional logo material costs), so 15,000 units * $6.50/unit = $97,500. Adding the cost of the labeling machine gives total incremental costs of $109,500. Since the incremental costs are more than the incremental revenue, they should not accept the special order.
For b, the change in profit is simply the incremental revenue minus the incremental costs. In this case, $105,000 - $109,500 = -$4,500. Therefore, accepting the order would decrease profit by $4,500.
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M Corporation uses the weighted-average method in its process costing. The following data pertain to its Assembly Department for September. Percent Complete Units Materials Conversion Work in process, September 1 1,900 55 % 10 % Units started into production during September 9,300 Units completed during September and transferred to the next department 8,400 Work in process, September 30 2,800 75 % 25 % Required: Compute the equivalent units of production for both materials and conversion costs for the Assembly Department for September using the weighted-average method.
Answer:
For material = 10,500 units
For conversion = 9,100 units
Explanation:
The computation of the equivalent units of production for both materials and conversion costs is shown below:-
For material = Units completed and transferred to the next department + (Work in process × Material work in progress percentage
= 8,400 + (2,800 × 75%)
= 8,400 + 2,100
= 10,500 units
For conversion = Units completed and transferred to the next department + (Work in process × Conversion work in progress percentage
= 8,400 + (2,800 × 25%)
= 8,400 + 700
= 9,100 units
Therefore we have computed the equivalent units of production for both materials and conversion costs by applying the above formula.
Flounder Rides makes bicycles. It has always purchased its bicycle tires from the Balyo Tires at $10 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows:
Direct materials $3
Direct labor $4
Variable manufacturing overhead $1
The company’s fixed expenses would increase by $28,250 per year if managers decided to make the tire. Calculate total relevant cost to make or buy if the company needs 5,810 tires a year.
Answer:
Flounder should buy.
Relevant cost of making $ 74,730
Relevant of buying $58,100
Explanation:
Relevant cost are future incremental cash cost that arise as a direct consequence of a decision.
The relevant costs of making the tires internally are
$
Variable cost of making
(3+4+1)× 5,810 46,480
Incremental fixed cost = 28,250
Total relevant cost 74,730
Relevant cost of buying
External cost × units = 10× 5,810 = $58,100
Flounder Rides should buy as this will save it $16630 i. e (74,730 - 58100)
Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $284,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 7% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if Allowance for Doubtful Accounts has a credit balance of $2,600 before adjustment?
Answer:
Debit Bad debt expenses with 17,280; and Credit Allowance for Doubtful Accounts also with $17,280.
Explanation:
Bad expenses = ($284,000 × 7%) - $2,600 = $17,280
The adjusting will be as follows:
Details Dr ($) Cr ($)
Bad debt expenses 17,280
Allowance for Doubtful Accounts 17,280
To record the amount estimated to be uncollectible
Answer:
Debit Bad debt expense $17,280
Credit Allowance for doubtful debt $17,280
Explanation:
When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.
To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.
Allowance required = 7% * $284,000
= $19,880
Amount to be adjusted = $19,880 - $2,600
= $17,280
Canfield Technical School allocates administrative costs to its respective departments based on the number of students enrolled, while maintenance and utilities are allocated per square feet of the classrooms. Based on the information below, what is the total amount of administrative cost to the Accounting Department (rounded to the nearest dollar) if administrative costs for the school were $50,000, maintenance fees were $12,000, and utilities were $6,000?Department Students ClassroomsElectrical 120 10,000 sq. ft.Welding 70 12,000 sq. ft.Accounting 50 8,000 sq. ft.Carpentry 40 6,000 sq. ft.Total 280 36,000 sq. ft.$8,929.$17,000.$18,500.$22,667.$11,111.
Answer:
The total amount of administrative cost to the Accounting Department is $ 14,900.
Explanation:
In order to calculate the total amount of administrative cost to the Accounting Department, first we need to calculate the Utilization Ratio of the particulars, using the following formua:
Utilization Ratio=(Total amount particular/Utilised by accounting department)
Hence, the Utilization Ratio of Administration costs =(50/280)
=0.178
the Utilization Ratio of Maintenance fee =(12,000/36,000)=0.33
the Utilization Ratio of Utilities=(12,000/36,000)=0.33
Therefore, the total amount of administrative cost to the Accounting Department=(0.178×$50,000)+(0.33×$12,000)+(0.33×$6,000)
=$8,900+$4,000+$2,000
=$14,900
It announces that it plans to pay dividends of $1 per share exactly three years from now and $2 per share exactly four years from now. From year 5 onwards, dividends are expected to grow at a constant rate of 10% per year. The company pays no dividends in years one and two. The risk-free rate is 5%, the company's beta is 1.5 and the expected return on the market is 11%. Calculate the price of this stock at time period 4, P4
The Question is incomplete.
The complete question is as follows:
It announces that it plans to pay dividends of $1 per share exactly three years from now and $2 per share exactly four years from now. From year 5 onwards, dividends are expected to grow at a constant rate of 10% per year. The company pays no dividends in years one and two. The risk-free rate is 5%, the company's beta is 1.5 and the expected return on the market is 11%. Calculate the price of this stock today
Answer:
Price of stock = $34.42
Explanation:
The Dividend Valuation Model is a technique used to value the worth of an asset. According to this model, the worth of an asset is the sum of the present values of its future cash flows discounted at the required rate of return.
Required rate of return
Using the CAPM , the rate of return on equity can be determined as follows:
E(r)= Rf +β(Rm-Rf)
E(r) =? , Rf- 5%, Rm- 11%, β- 1.5
Ke = 5% + 1.5× (11-5)%
= 14%
Present value of Dividends(PV)
Year PV
3 $1.00, × (1.14^(-3) = 0.6749
4 $2.00× 1.14^(-4) = 1.18416
5 and beyond
This will be done in two (2) steps as follows:
PV in year 4 = (2 × 1.10) /(0.14-0.1) = 55
PV in year 0 = 55× 1.14^(-4) = 32.56
Price of stock
= 0.6749 + 1.18416 + 32.56
= $34.423
A corporate bond is quoted at a price of 103.16 ($1031.60) and carries a 5.20 percent coupon. The bond pays interest semiannually. What is the current yield on one of these bonds
Answer:
6.30 percent
Explanation:
Base on the scenario been described in the question. For we to calculate the current yield of one of the bond, we have to use the following procedure
Current yield = ( 0.065×$1,000)/(1.0316 × $ 1,000)
Current yield = 65 / 1,031.6
Current yield = 0.063008918185343× 100%
Current yield = 6.30percent approximately.
Answer:
5.04%
Explanation:
Current yield is the ratio of coupon payment of a bond to its current market price. It is calculated by using coupon payment and the current market value of the bond.
Coupon Payment = $1,000 x 5.2% = $52
Formula for Current yield is as follow
Current Yield = Annual Coupon Payment / Current Market Price
Current Yield = $52 / $1,031.60
Current Yield = 5.04%
A company's financial statements may contain errors even if debits and credit balance because:
A. wrong but equal amounts may have been posted to correct accounts
B. correct but equal amounts may have been posted to wrong accounts
C. wrong but equal amounts may have been posted to wrong accounts
D. of all these reasons.
Answer:
B. correct but equal amounts may have been posted to wrong accounts
Explanation:
It is possible that in the presence of the errors the debits and credits side remains balance.
Following errors may balance the debits and credits
Error of omission ( Transaction is totally omitted)Error of commission (posting in wrong accounts by same value)Error of Principle (Entry made against the principle of accounting)Error of Original Entry (Wrong amount posted on both debit and credit sides)Compensating error (Two errors compensate each others effect)All of the above errors may present in case of balanced debit and credit sides.
Which of the following are ways to develop a better social network:
A. Occupy structural holes
B. Invest in monastic endeavors
C. Maximize homophily
D. Invest in relationships that extend your expertise
E. Develop connections with powerful others
Answer:
The ways to develop a better social network is to:
C. Maximize homophily
D. Invest in relationships that extend your expertise
E. Develop connections with powerful others
Explanation:
Maximizing homophily refers to the tendency to have positive ties with individuals who are similar in socially significant ways. Engaging regularly or hanging out with your kind is a good way to develop better social network.
Investing in relationships that extends your expertise is a proactive way of breaking new grounds and connecting with people that are ahead of you in a cordial manner. More like a mentor-mentee approach.
Developing connections with powerful others opens up the gate to the elite social community which will deepen your social network.
The importance of managing cash in hand Cash is considered an idle asset because it does not earn interest. Good financial management requires a firm to hold a limited amount of cash, but it is important for the firm to hold sufficient cash so that it can pay its current obligations, maintain its credit rating, and meet its unexpected cash needs. The following statement refers to a type of cash balance. Select the best type of cash balance to complete the sentence: A cash balance is held to allow firms to take advantage of any bargain purchases that might arise. Consider the following case of Columbus Builders Inc.: Imagine that Columbus Builders Inc. is a manufacturing company. Columbus’s board is looking to expand through acquisition and would like to be able to react quickly if an opportunity presents itself. Columbus’s financial managers are making sure that cash is available to use as a down payment to commit to a purchase in the near future. What type of cash balance is this? Precautionary Speculative Compensating Transactions
Answer: 1. Speculative Motive/Balance
2. Speculative Balance
Explanation:
1. A cash balance is held to allow firms to take advantage of any bargain purchases that might arise.
SPECULATIVE MOTIVE.
This is a motive of holding money that enables the holder to take advantage of good deals be it in the stock market or as the scenario portrays, in the goods market.
2. The balance that Columbus has is a Speculative Balance. Like earlier mentioned, this money is kept to ensure that good deals are taken advantage of and seeing as Columbus wants to expand in future, keeping this money on hand ensures that they can react swiftly to secure a deal should an opportunity rear it's head.
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Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,800 rackets and sold 5,700. Each racket was sold at a price of $98. Fixed overhead costs are $93,840 and fixed year selling and administrative costs are $66,000. The company also reports the following per unit costs for the Variable production costs Variable selling and administrative expensesS 280 $25.80 Required: Prepare an income statement under variable costing ACES INC
Answer and Explanation:
The preparation of an income statement under variable costing is shown below:-
Income statement under variable costing
ACES INC
Sales $558,600
(5,700 × $98)
Less:
Cost of goods sold
Variable product cost $147,060
($25.80 × 5,700)
variable selling administrative
expenses ($2.80 × 5,700) $15,950
Less: Total variable cost $163,020
Contribution margin $395,580
Less: Fixed overhead cost $93,840
Less: Fixed and selling
administrative expenses $66,000
Net income $235,740
To prepare a variable costing income statement for ACES INC., calculate the sales revenue, subtract the sum of variable production and selling costs, and then subtract total fixed costs to get the net income, which is $61,300.
Variable Costing Income Statement for ACES INC.
To create an income statement under variable costing for ACES INC., we need to account for all variable costs and exclude fixed manufacturing overhead from the cost of goods sold. Here is how you can calculate it:
Sales Revenue: To calculate sales revenue, we multiply the number of rackets sold by the price per racket: 5,700 rackets × $98 = $558,600.
Variable Costs: The total variable production costs are the per unit cost ($28) times the number of units produced: 6,800 rackets × $28 = $190,400.
The variable selling and administrative expenses are the per unit cost ($25.80) times the number of units sold: 5,700 rackets × $25.80 = $147,060.
Contribution Margin: To calculate the contribution margin, subtract the total variable costs from the sales revenue: $558,600 - ($190,400 + $147,060) = $221,140.
Fixed Costs: The total fixed costs are the sum of fixed overhead costs and fixed selling and administrative costs: $93,840 + $66,000 = $159,840.
Net Income: To calculate the net income, subtract total fixed costs from the contribution margin: $221,140 - $159,840 = $61,300.
Mimi Company is considering a capital investment of $275,000 in new equipment. The equipment is expected to have a 5-year useful life with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $80,000, respectively. Mimi's minimum required rate of return is 10%. The present value of 1 for 5 periods at 10% is .621 and the present value of an annuity of 1 for 5 periods at 10% is 3.791.
Required:
Compute each of the following:
a. The cash payback period.
b. The net present value of the total investment.
c. The profitability index.
d. The Internal rate of return.
e. The annual rate of return.
Answer:
Payback Period: 11 Years
Net Present Value: $123,055
Profitability Index: 0.45
Internal rate of return: 53.48%
Annual rate of return: 38.18%
Explanation:
Payback Period:
The Cash Payback Period can be calculated from the following formula, when the cash inflows are even Cash flows:
Payback Period = Investment / Even Cash flow
Here total annual even cash flow = $25,000 + $80,000 = $105,000
By putting values, we have:
Payback Period = $275,000 / $25,000 = 11 Years
Net Present Value:
As we know:
Net present Value = Present Value of Cash inflow - Present Value of Cash Outflow
Here
Present Value of Cash Inflow = Even Cash flow * Annuity Factor
By putting values:
Present Value of Cash Inflow = $105,000 * 3.791 = $398,055
Now Present value of cash outflow which is investment will the same because the money is invested in the year zero.
Which means:
Net present Value = $398,055 - 275,000 = $123,055
Profitability Index:
The profitability Index can be calculated using the following formula:
PI = NPV / Investment
So by putting values, we have:
PI = $123,055 / $275,000 = 0.45
Internal rate of return:
At 10%, NPV is $123,055 so all we have to do is to use a higher cost of capital to find using the formula at the end, the breakeven rate of return at which NPV is zero.
So I choose 20%.
At 20%, annuity factor is 2.990 which is approximately 3.
So
NPV = $125,000 * 3 - $275,000 = $100,000
By putting values in the following formula:
IRR = Lower Percentage + (Higher percentage - Lower percentage) * (NPV at Higher Percentage) / (NPV at lower - NPV at higher)
By putting values, we have:
IRR = 10% + (20% - 10%) * ($100,000) / ($123000 - $100,000)
IRR = 10% + 10% * 4.348 = 53.48%
Annual rate of return:
Annual rate of return can be calculated using the following formula:
Annual rate of return = Earnings Before Interest and tax / Investment
Here
Earnings before interest and tax is $105,000
So by putting formula, we have:
Annual rate of return = $105,000 / $275,000 = 38.18%
The value of the computations will be:
Payback Period = 11 YearsNet Present Value = $123,055Profitability Index = 0.45Internal rate of return = 53.48%Annual rate of return = 38.18%The Payback Period will be calculated as:
Payback Period = Investment / Even Cash flow
Cash flow = $25,000 + $80,000 = $105,000
Payback Period will now be:
= $275,000 / $25,000
= 11 Years
The net present value will be:
= Present Value of Cash inflow - Present Value of Cash Outflow
where,
Present Value of Cash Inflow = Even Cash flow × Annuity Factor
= $105,000 × 3.791
= $398,055
Therefore, the net present value will be:
= $398,055 - 275,000
= $123,055
The profitability index will be:
PI = NPV / Investment
PI = $123,055 / $275,000
= 0.45
The internal rate of return will be:
NPV = ($125,000 × 3) - $275,000
NPV = $375000 - $275000
= $100,000
Therefore, IRR will be:
= Lower Percentage + (Higher percentage - Lower percentage) × (NPV at Higher Percentage) / (NPV at lower - NPV at higher)
IRR = 10% + (20% - 10%) × ($100,000) / ($123000 - $100,000)
= 10% + (10% × 4.348)
= 53.48%
Lastly, the annual rate of return will be:
Annual rate of return = Earnings Before Interest and tax / Investment
Annual rate of return = $105,000 / $275,000 = 38.18%
Therefore, the annual rate of return is 38.18%.
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When comparing levered versus unlevered capital structures, leverage works to increase EPS for high levels of EBIT because interest payments on the debt: A. vary with EBIT levels. B. stay fixed, leaving less income to be distributed over fewer shares. C. stay fixed, leaving more income to be distributed over fewer shares. D. stay fixed, leaving less income to be distributed over more shares.
Answer:
C. Stay fixed, leaving more income to be distributed over fewer shares.
Explanation:
Levered cash flow is of interest to investors because it indicates how much cash a business has to expand.
These capital structures are said to appear on balance sheet.
The difference between the levered and unlevered free cash flow is also an important indicator. The difference shows how many financial obligations the business has and if the business is overextended or operating with a healthy amount of debt. It is possible for a business to have a negative levered cash flow if its expenses exceed its earnings.
A brand of shoes costs $29.00 to manufacture in Omaha, Nebraska. The shoes are then shipped to shoe stores across the country. When you see them on the shelves, the price is $69.99. How do you think the price you pay for the sneakers is determined? Use percent to describe the markup. Explain your reasoning.
Answer:
90.00
Explanation:
In the United States, one worker can produce 10 tons of steel per day or 20 tons of chemicals per day. In the United Kingdom, one worker can produce 5 tons of steel per day or 15 tons of chemicals per day. Which of the following statements is correct? Select one: a. U.S. wages will be higher than U.K. wages. b. U.K. wages will be higher than U.S. wages. c. Wages in the United States and the United Kingdom will be equal. d. There will be no relationship between U.S. and U.K. wages.
Answer:
a. U.S. wages will be higher than U.K. wages.
Explanation:
Wages, which are the factor price for labor, depend on the marginal productivity of labor.
In other words, workers are paid in proportion to the amount of additional output they produce.
In this case, the marginal productivity of a U.S. worker (10 tons of steel, or 20 tons of chemicals) is higher than the marginal productivity of an U.K. worker (5 tons of steel or 15 tons of chemicals), for this reason, the U.S. worker will be paid more than the U.K. worker.
Final answer:
The correct statement is: b. U.K. wages will be higher than U.S. wages. Explanation of why U.K. wages will be higher than U.S. wages based on comparative advantage in production.
Explanation:
To determine this, we can calculate the opportunity cost of producing steel for each country. Since the U.K. has a lower opportunity cost of producing steel compared to the U.S., it implies that the U.K. is more efficient in steel production, leading to higher wages in the U.K. for steel production.
Similarly, the same reasoning can be applied to the production of chemicals, where the U.S. will have lower wages for chemical production due to its higher opportunity cost compared to the U.K.The calculation of future worker productivity levels between Canada and the United Kingdom requires us to apply the concept of compound growth to their respective hourly productivity rates, which start at $30 per hour for Canada and $25 per hour for the UK. With Canada's productivity growing at a rate of 1% per year and the UK's at 3% per year, the formula to calculate the future productivity level of each country after five years is: Future Value = Present Value * (1 + growth rate)^number of periods.
Q 7.27: A large furniture store has several sales clerks who ring up sales for customers and receive cash. At the end of the day, the clerks tally their cash register drawer and take the cash and checks to the cashier. The shift supervisor collects all of the cash register tapes at the end of each shift and sends it to the accounting department. Which cash receipt control is the company implementing?
Answer: Separation of duties.
Explanation:
This question might have options that were not posted along with it however, I shall give the most likely answer.
Separation of duties is an accounting method that aims to prevent unethical accounting practices such as fraud. It is simply done by assigning to different people, various roles in the accounting process.
In the above scenario, sales clerks ring up the sales and receive cash and take it to the cashier, while the shift supervisor takes the cash register tapes to the accounting department.
what is the best way to trade market volatility?
Answer:
Two ways: using VIX futures and traded notes or S&P 500 options and neutral investment strategies.
Explanation:
Volatility is a market's tendency to rise or fall sharply within short periods of time. It is usually measured using standard deviation or return on investment. There are several ways to handle market volatility. One is to use exchange-traded instruments, such as VIX future contracts and exchange traded notes. VIX provides real time estimations of greed and fear levels, as well as volatility expectations in the next 30 sessions. The other way is to use S&P 500 options and delta-neural strategies.
The management of Blue Spruce Corp. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2022, the accounting records show these data. Inventory, January 1 (10,000 units) $ 30,000 Cost of 123,000 units purchased 419,000 Selling price of 100,000 units sold 765,000 Operating expenses 121,000 Units purchased consisted of 38,000 units at $3.20 on May 10; 57,000 units at $3.40 on August 15; and 28,000 units at $3.70 on November 20. Income taxes are 28%. (a) Prepare comparative condensed income statements for 2022 under FIFO and LIFO.
Answer:
Comparative condensed income statements for 2022
LIFO FIFO
Sales 765,000 765,000
Less Cost of Sales (345,400) (327,400)
Gross Profit 419,600 437,600
Less Expenses:
Operating expenses 121,000 121,000
Operating Income before tax 298,600 316,600
Less Income tax (28,608) (88,648)
Operating Income after tax 269,992 227,952
Explanation:
Calculation of Cost of Sales - LIFO
Cost of Sales : 28,000 units×$3.70 = 103,600
57,000 units×$3.40 = 193,800
15,000 units×$3.20 = 48,000
Total =345,400
Calculation of Cost of Sales - FIFO
Cost of Sales : 10,000 units×$3.00 = 30,000
38,000 units×$3.20 = 121,600
52,000 units×$3.40 = 175,800
Total = 327,400
6. Explain how liabilities of an LLC (taxed as a partnership) or an S corporation affect the amount of tax losses from the entity that limited liability company members and S corporation shareholders may deduct. Do the tax rules favor LLCs or S corporations?
Answer:
LLC liabilities are included as part of member's tax basis while S corporation liabilities are not.
Tax rules favors LLCs.
Explanation:
LLC liabilities are included as part of a member's tax basis while S corporation liabilities are not included in an S corporation shareholder's tax basis other than loans from the shareholders.
This distinction is important because the amount of loss a member or shareholder may deduct is limited to his or her tax basis in either his or her LLC interest or shares. Thus in this particular regard Tax rules favors LLCs.
Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $960,000, 34%, and $19,200, respectively. The North Divisions contribution margin and contribution margin ratio are $121,600 and 38%, respectively. The South Division’s segment margin is $140,800. The company has $211,200 of common fixed expenses that cannot be traced to either division.Required:
Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions.
Final answer:
The segmented income statement for Shannon Company shows a total net operating income of $19,200. The North Division has a segment margin of $121,600, while the South Division's segment margin is $140,800, after accounting for sales, variable expenses, and traceable fixed expenses.
Explanation:
Shannon Company Segmented Income Statement
Overall Company:
Total Sales: $960,000
Less: Variable Expenses (66% of Sales): $633,600
Contribution Margin (34% of Sales): $326,400
Less: Common Fixed Expenses: $211,200
Net Operating Income: $19,200
North Division:
Sales (Calculated as Contribution Margin / Contribution Margin Ratio): $320,000
Less: Variable Expenses (62% of North Division Sales): $198,400
Contribution Margin (38% of North Division Sales): $121,600
Less: Traceable Fixed Expenses (Calculated as North Division Contribution Margin - Segment Margin): $0
Segment Margin: $121,600
South Division:
Sales (Calculated as Total Sales - North Division Sales): $640,000
Less: Variable Expenses (Calculated as Total Variable Expenses - North Division Variable Expenses): $435,200
Contribution Margin (Calculated as Total Contribution Margin - North Division Contribution Margin): $204,800
Less: Traceable Fixed Expenses (Calculated as South Division Contribution Margin - Segment Margin): $64,000
Segment Margin: $140,800
Elmdale Company has a machine that affixes labels to bottles. The machine has a book value of $80,000 and a remaining useful life of 3 years and no salvage value. A new, more efficient machine is available at a cost of $300,000 that will have a 5-year useful life with no salvage value. The new machine will lower annual variable production costs from $520,000 to $410,000. Prepare an analysis showing whether the old machine should be retained or replaced.
Answer and Explanation:
The preparation of the analysis showing whether the old machine should be retained or replaced is presented below:
Particulars Retained equipment Replace equipment Change in the net income
Variable cost $1,560,000 $1,230,000 $330,000
($520,000 × 3 years) ($410,000 × 3 years)
Cost of the new
machine $300,000 -$300,000
Net change $30,000
As we can see the amount comes in positive which reflects that the machine should be replaced
Why might a commercial real estate investor borrow to help finance an investment even if she could afford to pay 100 percent cash? (which is most correct) Group of answer choices Keep leverage low thus reduce risk. increase the rate of return investors earn on their invested equity. Mattress feels better with cash inside Want to keep my money for a rainy day
Answer:
The answer is B. Increase the rate of return investors earn on their invested equity
Explanation:
The correct answer is Option B. Increase the rate of return investors earn on their invested equity
Borrowing refers to the use of financial leverage. If the overall return on the commercial real estate exceeds the cost of debt, the use of borrowed fund can increase the rate of return investors earn.
Portfolio diversification is also one of the benefits to be derived from this.